Latest Developments in the Canadian Economic Accounts
The 1981 to 2012 revisions of the Income and Expenditure Accounts
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This article highlights the revisions to the Gross Domestic Product (GDP) by Income and by Expenditure Accounts for the period 1981 to 2012. This is the first time these accounts are being revised under the Canadian System of Macroeconomic Accounts (CSMA) new revision policy. For more information on the policy consult the article “An overview of the upcoming planned revisions to the Canadian System of Macroeconomic Accounts” in the publication Latest Developments in the System of National Accounts.
Statistical, conceptual and methodological revisions are carried out regularly in the CSMA. Conceptual and methodological revisions occur less frequently than statistical revisions. The 1981 to 2012 revisions to the GDP by Income and by Expenditure Accounts do not include any conceptual revisions and only one methodological revision. The majority of the revisions are statistical in nature.
The statistical revisions to GDP reflect the incorporation of the most current data sources, including survey results, administrative data, public accounts and the Input-Output Tables. The Input-Output Tables incorporate Statistics Canada’s highest quality data sources in a rigorous and detailed accounting framework. As such, they represent the most detailed and coherent accounting system for the structure of the Canadian economy and are considered the most accurate benchmarks on which to anchor estimates in the CSMA. With this release, data from the input-output tables (revised 2009 and updated 2010) have been integrated into the GDP by Income and by Expenditure Accounts. New benchmark information (from annual surveys and administrative data) is incorporated for the more recent periods (2011 and 2012).
This article describes and explains the revisions. It examines the revisions to annual and quarterly gross domestic product on both a nominal and real basis. It also examines the revisions to the various components of gross domestic product with emphasis on the period 2009 to 2012, where the majority of the revisions have taken place.
Revisions to annual GDP
Revisions to nominal GDP
On a nominal basis the average annual growth rate of GDP for the period 1982 to 2008 remained 5.7%. For the period 2009 to 2012 the annual growth rate was revised upward in 2009 and 2012, and downward in both 2010 and 2011. The revisions in 2010 and 2012 are large by historical standards. The downward revision in 2010 was mainly due to a reduction in the growth of business investment in machinery and equipment and government final consumption expenditure. The upward revision in 2012 was largely attributable to an increase in the growth rate of investment in non-residential structures and business inventories.
Revisions to real GDP
For the period 1982 to 2008, there was no revision to the average annual growth rate of real GDP. For the period 2009 to 2012 the largest revision occurred in 2010, where the annual growth of real GDP was revised from 3.2% to 3.4%, a 0.2 percentage point increase. Increases for 2009, 2011 and 2012 were less pronounced with 2009 revised upwards by 0.1 percentage point, and both 2011 and 2012 revised downward by 0.1 percentage points.
Revisions to quarterly GDP
The average quarterly growth rate of real GDP over the 1981 to 2008 period was unchanged, at 0.6% (see Table 4). The average quarterly growth rates from 2009 to 2012 were also little changed.
Revisions to the GDP by Income and by Expenditure Accounts
1981 to 2008
For the period 1981 to 2008 the largest revision to the GDP by Income and by Expenditure Accounts was due to the incorporation of revised estimates of consumption of fixed capital for the government sector. In December 2012, new estimates from Statistics Canada’s fixed capital flows and stocks program were released for the period 1961 to 2012. These new estimates resulted in revisions to government consumption of fixed capital. The revised estimates have been incorporated in the CSMA for the period 1981 to the present.
Government consumption of fixed capital represents the gross operating surplus of governments in the GDP by income account and a portion of government final consumption expenditure in the GDP by expenditure account. As such, this revision served to increase the overall level of GDP for the entire period. The impact on the quarterly and annual growth rates of GDP was minimal.
Corporate consumption of fixed capital was also revised for the period 1981 to 2008 to align with the latest information from the capital flows and stocks program for the corporate sector. While these revisions do not change the level of gross domestic product they do change the level of Canada’s net domestic product. Net domestic product represents the income generated from production after accounting for the income that is set aside to replace the capital used up in the production process. From 1981 to 1998, net domestic product was generally revised upward while for the period 1999 to 2008 net domestic product was generally revised downward.
Revised estimates of selected household expenditures were incorporated for the period 1981 to 2012. During the compilation of the 2009 and 2010 Input-Output Tables it was determined that a few series (such as expenditures on education and operation of transport equipment) were underestimated. New benchmarks were established and the level was revised through the entire time period.
The CSMA also improved the price index used to deflate own-account research and development. In the previous version, own-account research and development was deflated using input prices (such as wages and salaries) for the professional and scientific services industry. The new methodology uses a weighted average of the wages and salaries of researchers in the industries where the own-account production takes place. For example the own-account research and development in the manufacturing industry is deflated using the wages and salaries of researchers in the manufacturing industry (rather than the wages and salaries of researchers in the professional and scientific services industry). This ensures a better alignment between the nominal value and the real value of own-account research and development. In general, this did not change the quarterly or annual growth in GDP with the exception of the late 1990s and early 2000s where there were significant changes in the wages and salaries of researchers.
2009 to 2012
For the period 2009 to 2012, revisions were chiefly the result of new Input-Output benchmarks and the incorporation of new source data.
Revisions to the components of the GDP by income account are shown in Table 5. Compensation of employees was little changed in 2009 and 2010. The incorporation of tax-based estimates of compensation of employees resulted in a $4.5 billion increase in 2011 and a further $6.9 billion gain in level in 2012.
Estimates of surplus were higher in 2009 and 2010, the result of new benchmarks from the Input-Output system. The incorporation of tax based estimates of corporate sector surplus reduced the estimate in 2011.
Revisions to gross mixed income were chiefly due to incorporating new data from the Canada Revenue Agency.
Table 6 provides a summary of changes to the GDP by expenditure account. Household final consumption was revised upward in all years from 2009 to 2012.
Government final consumption expenditure was revised downward for all years in the 2009 to 2012 period. This was due to new Input-Output benchmarks in 2009 and 2010 which were carried forward into 2011 and 2012. New public account information for provincial, territorial and local governments became available resulting in the majority of the revision.
Final expenditure of non-profit institutions serving households’ was revised downward due to the incorporation of new tax benchmarks. Specifically, estimates of wages and salaries paid by non-profit institutions serving households were lowered in all years from 2009 to 2012. The initial estimate was based on growth rates for the non-profit industry as estimated by the survey of employment, hours and payrolls. The revised estimate was derived directly from administrative data records which represent a census of the actual wages and salaries paid by non-profit institutions serving households to their employees.
Business gross fixed capital formation was lowered by $2.0 billion in 2009 as final estimates of capital investment data became available from the Input-Output Tables. The revisions were less significant in 2010, 2011 and 2012. In 2011, there was a large revision in the type of investment with purchases of machinery and equipment being revised down and investment in non-residential structures being revised upward.
Government gross fixed capital formation was revised downward in 2011 by $2.5 billion and then upward in 2012 by $2.5 billion with the incorporation of new data from the Capital and Repair Expenditures Survey released in February 2013.
There was a large upward revision to business inventories in 2011 (+$6.3 billion) due to new data originating from the Annual Survey of Manufacturing, the Annual Wholesale Trade Survey and the Annual Retail Trade Survey.
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